NAIC NISC Proposal Condemned at Public Hearing

The proposal by the National Association of Insurance Commissioners (NAIC) to create a National Insurance Supervisory Commission (NISC) drew widespread industry condemnation during a one-hour...

December 9, 2009

The proposal by the National Association of Insurance Commissioners (NAIC) to create a National Insurance Supervisory Commission (NISC) drew widespread industry condemnation during a one-hour public hearing held by the NAIC on December 5 in San Francisco.

NAIC President Roger Sevigny said the proposed NISC would directly link state regulators and a proposed new federal insurance office. States participating in the new entity, and the NAIC, would identify and develop standards for regulatory uniformity, then enact and enforce those rules. Possible enforcement would include "limited federal preemption," Sevigny said.

In addition to comments by PIA (see previous item), Kentucky State Rep. Robert Damron, president of the National Conference of Insurance Legislators (NCOIL), said the NAIC cannot expect state lawmakers to allow their states to surrender some of their independence and join such a commission. "In my opinion, the legislators would totally rebel," he said. Damron said the NAIC should not expect Congress to designate state regulators to do anything "and then expect them to let you run the show."

Robert Detlefsen, vice president of public policy for the National Association of Mutual Insurance Companies, agreed, saying the NAIC has "unrealistic" federal expectations.

Rhode Island State Rep. Brian Kennedy said the plan strives for uniformity "at the direct expense of state legislators" and creates a path toward federal insurance regulation. Kennedy, a committee chair at the National Conference of State Legislatures, said he will ask the NCSL to formally condemn the proposal.

Opposition to the NISC proposal follows on the heels of the NAIC's conditional endorsement of federal legislation to create a Federal Insurance Office (FIO). In contrast, NCOIL passed a strong resolution opposing the Federal Insurance Office Act of 2009 (H.R. 2609), warning that the national insurance office is "a systematic effort to try to supplant state insurance laws."

From wire service reports and PIA on-scene reports.

What It Means to Agents: What we are seeing here is a split over the NAIC's "riverboat gamble." Rather than maintaining outright opposition to federal involvement in insurance regulation, NAIC is trying to limit the federal government's involvement and preserve state regulation, while trying to prevent limited federal involvement from supplanting state regulation. Other groups disagree with this strategy.

During years of debate, staunch advocates of state regulation have maintained that a federal insurance presence will be used by advocates of full federal regulation to advance their goals. In fact, the NAIC had to act to win changes to H.R. 2609, after it had been altered to strip out safeguards that had been negotiated and the FIO granted virtually unchecked authority to preempt state insurance laws and regulations, supposedly because they would conflict with international agreements. NAIC succeeded in getting the "camel's nose out of the tent," mostly, but then the nose appeared again when Optional Federal Charter advocates led by Rep. Melissa Bean (D-Ill.) came up with the idea that the FIO should be required to conduct a study of the "benefits" of federal insurance regulation and report to Congress - in effect, guaranteeing a biased study. And this is what has been happening even before an FIO is created!

"H.R. 2609 may have been pulled back from the precipice of federal insurance regulation at the last minute thanks to the NAIC's amendments, but it still places our national system of state based insurance regulation on shaky ground," said PIA National Executive Vice President & CEO Leonard C. Brevik. "It opens the door a crack to federal insurance regulation, when we should be making sure that door remains firmly closed."